KB Securities has raised its target price for Jeju Air by 12.3% to 6,400 won, reflecting fuel savings and improvements in financial structure. However, the firm maintained its investment opinion at 'hold' due to slow recovery in international passenger fares and the possibility of a return to operating losses in the fourth quarter.
In a report released on the same day, analyst Kang Seong-jin noted, "While the reduction in fuel usage and the decline in debt ratio are positive, international passenger fares remain low, and we expect operating losses to return in the fourth quarter."
Jeju Air reported an operating profit of 54.9 billion won in the third quarter, marking a return to profitability compared to the same period last year. This figure exceeded market expectations and KB Securities' previous forecasts by 422% and 176%, respectively. Despite a one-time maintenance cost burden of approximately 40 billion won, the increase in international passenger fares by 38% year-on-year helped offset the rising fuel costs.
Kang assessed, "The rise in international passenger fares likely offset the cost increases due to higher fuel prices."
The reduction in fuel consumption also contributed to the improved performance. By scaling back on low-profit Southeast Asian routes and increasing the proportion of fuel-efficient new aircraft, fuel usage is estimated to have decreased by 13% compared to the previous year. The net profit for the period also surpassed market expectations by 49.2 billion won, influenced by gains from the disposal of tangible assets.
The key to future performance will be the recovery of international passenger fares. Although the third quarter saw an increase in these fares compared to the previous year, they have not yet reached the levels seen before the outbreak of war in the first quarter. While the profitability-focused operational structure has improved due to the reduction of Southeast Asian routes, analysts suggest that the surge in fuel costs since the second quarter has not been adequately reflected in ticket prices.
Kang warned, "If international passenger fares in the fourth quarter do not reflect the rising oil prices, we could see a return to operating losses, and the benefits of falling oil prices in 2027 may be diminished."
* This article has been translated by AI.
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